March 26, 2013
The days of Cyprus as an offshore banking centre for rich Russians or Britons are well and truly over. All things considered, however, the 30 billion dollars held by them in Cypriot bank accounts is a paltry amount next to the 20 trillion dollars held by Western corporations and individuals in some 60 fiscal havens. ( The Economist)
For a while now, the G20 political leaders have been promising concerted action against these tax shelters. So far, nothing of substance happened, though such bellicose declarations make for great television .The absence of results in this area will irreparably damage the reputation of concerned politicians, highlighting their utter impotence .
Consider for a moment Apple, for instance. The US corporation holds in its treasury no less than 147 billion dollars. For years, its directors refused to distribute dividends to shareholders, let alone pay normal tax rates. The iconic i-pod and i-phone manufacturer builds them cheaply in China; distributes them at premium prices in the West and stashes away the profits on an island .
Bare a few exceptions, this new breed of entrepreneurs and corporate top brass are, at best, a mixed blessing for the global economy. Sure, a large quantity of consumer goods are being produced and sold around the world. But who benefits from it all? Certainly not the workers, the host states or the consumers . If Henry Ford believed a corporation should pay decent enough wages to workers, to enable them to buy the goods being produced, no such scruples bother today’s business leaders; A large amount of corporate time and money is being devoted instead on devising ways to avoid taxes, circumvent national legislations or fight in court against fines imposed on their excesses in some parts of the world, notably in the European Union
These regressive ways of doing business are mainly responsible for the high unemployment rates in the West, a dearth of financial resources affecting governments, weather rich or poor, and low growth rates, even as enormous amounts of unspent cash sit idle in fiscal havens. Not surprisingly, many leading economists believe that this harmful form of capitalism has to end, although there is not yet a consensus as to how. Failing this, we may very well witness the implosion of the whole system as we knew it for the past few hundred years.Florian Pantazi